Making It to the Top

The Security 50 ranking provided an opportunity for input from some of the top players in the security industry. We asked companies who participated in this year's ranking, along with other significant players, to discuss how they struggled to reach the top.

Security companies have enjoyed brisk business. Some companies have adapted to provide the required solutions, while others have not. What makes companies leaders in the security industry is the ability to predict future trends. The importance of understanding user needs is recognized, but putting that effort into action is more difficult.

For Hitron of Korea, high quality service was required, said Jay Lee, Hitron representative. This means having good product development that is suited to newly growing markets to meet local conditions. Listening to customers is also important to TeleEye, a Hong Kong provider of video surveillance solutions. While the company was not on this year's Security 50 ranking, the company participated in 2005. "Some companies are very focused on security applications," said Chief Marketing Officer Dr. Wallace Ma. "In other markets, however, they are more focused on business management."

By being close to customers for more than 20 years, CDV Group of France has developed products that meet specific customer requirements, said David Benhammou, President. The company specializes in access control products, including keypads, locking devices, biometric readers, telephone entry systems, power supply and accessories.

"The customer usually purchases the different components of the access control system from different suppliers," said Benhammou. "If a problem occurs with the system, then the installer will blame the access control system first. These problems are often very costly and time-consuming for the installer, not to mention the negative impact on the end user. But by developing and manufacturing all these products in house, CDV Group insures the compatibility and guarantees all the products to work perfectly together."

This breadth of experience and service allowed CDV to find out what its users wanted. "To be close to our customers and to the markets, we have decided to open CDV branches in different countries," Benhammou said. "Also, since the very beginning, we have always developed manufactured our own products. With more than 20 years of experience, we have acquired know-how to deliver high quality products."

It is communication that plays a crucial role at Israel-based Magal Security Systems. "We need to work very hard with both our customers and partners to ensure a collaborative relationship with each and every one," said Izhar Dekel, CEO. "We need to develop a better understanding by these potential customers and partners of the space that we are in and the technology behind our products now and in the future."

MARKETING CHALLENGES

Getting close to customers involves getting a message out to the market. Sending and targeting the right message are major challenges. Belgium-based Zenitel Group offers its access control solutions in several different countries, said Tove Nordberg, Market ing Director. "Success in a region depends on transferring effective approaches developed in core markets, but adapting them to diverse local needs."

Broader product lines can be required, she added, but this involves risks and costs given the high capital requirements involved in production and distribution. Furthermore, customers want marketing and promotional support that is tailored to specific needs and local languages. Zenitel looks to having a strong sales presence (distributors or system integrators) as "ability to forecast and react to rapid change is critical to our success in any region," Nordberg said.

Effect ive market ing involves a variety of strategies, from literature to hosting worldwide events. Through these strategies, Nordberg said, Zenitel maintains constant contact with users. "Zenitel has a strong marketing bias and a marketing strategy, which focuses on the following key areas: the focus and value that we bring to the end user and our branding of Stentofon," she said. "Zenitel attends a large number of local and international events around the world, conducts worldwide partner meetings, holds regular training sessions across several countries, has distributor days and, in 2006, invested heavily in marketing materials. Through direct contact with customers (in person, by telephone, mail, post, intercom and Web), Zenitel sends out data sheets, news bulletins, newsletters, special offers, invitations, press releases, and international or local coverage and other news items."

Having a local presence is part of Israeli Electronics Line 3000's strategy. The company said in a prepared statement that, "We have local representatives that are supported by our main office representatives. We are learning the needs of the market and helping our customers by investment in localization and customization of our products."

Milestone Systems, said CEO Lars Thinggaard, "is a specialist in managing an international approach to business. Coming from a small country like Denmark, Milestonefrom its very foundingwent global in scope and goals. Today, our software language support covers English, Danish, Japanese, German, Italian, French and Spanish. Our organization is also multicultural. We have employees from 12 different nationalities. Our worldwide partner network speaks for itself."

Increasing company awareness is a major part of Vicon's strategy. In its financial report, the American video surveillance company said it promoted its products through trade shows, literature, mailings, online promotions, training seminars for customers and end users, and road shows. Vicon products reach more than 1,000 dealers, system integrators and distributors, mostly sold directly by company representatives. Its Europe-based subsidiary sells in Europe, Scandinavia and the Middle East, along with others outside the U.S., which are principally by direct export from its U.S. base.

EDUCATING USERS

Education is also important. How that is done and what information needs to be distributed makes user education a challenge. Eli Gorovici, President and CEO of video surveillance provider DVTel, said: "It is a major challenge keeping our partners updated on our continuous development of new products. It is vitally important that we receive partner feedback." The company did not participate in this year's ranking.

Keeping users informed of new products and technologies is also a focal point for British IndigoVision, which offers intelligent video solutions as well as integrated access control. "The main challenge that we see is the continual education of the channel around moving from an analog to an IP solution," said Joanna Brace, Chief Marketing Officer. "IndigoVision is fully committed to leading the market with this effort. IP video security solutions will continue to grow at an aggressive rate. By 2009, there will be a change from PAL and analog technology to digital TV transmission, driven by the consumer TV market. The barrier to entry is lack of education of IT skills in the traditional CCTV industry. IT departments and the CCTV world are starting to work together; IndigoVisionwith its skills in both IP and CCTVprovides the right balance to bring both audiences together in order to understand and effectively implement an IP video security solution."

Technology is not the only hurdle as standards continually change. Zenitel informs its customers about industry benchmarks so that they are aware of any potential issues with regard to new technology. "The company's biggest inhibitor is standardization of technology," Nordberg said. "In 2007, Zenitel is bringing its understanding of the technology closer to our customers with the help of distribution partners so that, together, we can solve our future problems and meet customer needs."

System integrators must also be updated on the wide range of new security equipment and technical skills. "Installers need more education," Benhammou said. "To have access control, you have to know hardware, how to fix the locks. You have to know electrical systems for the power, the low voltage. You have to know computer software to manage the software, enroll people. It requires a lot of competence to do access control; it is quite complicated."

This means training installers. "They may be strong on hardware, locks and how to fix them," Benhammou said, "but very weak on computers. There is no school to provide all the know-how needed for access control. Integration of all the knowledge and know-how is what is paces the market. It cannot go fast if the installers take a step-by-step approach."

ENGINEERING HURDLES

Technology ultimately sets companies apart, and the race to have the best product is a competitive one. This year's ranking includes manufacturers of video surveillance, biometrics, intrusion alarms and access control solutions, along with security giants that integrated them into complete solutions.

Yoko is watching industries related to H.264 compression and NVR technology, said CEO Paul Wang. The Taiwanese manufacturer's three best-selling products are MPEG-4 DVRs, portable security recorders and auto focus zoom cameras. While watching trends is important, so is watching the right ones, said Bryan Kim, General Manager of Kodicom, a Korean video surveillance provider. "It takes a long time to develop a new product. Missing the market trend is a big risk for a small or medium-sized company."

For GeoVision, a Taiwanese supplier of digital surveillance systems, keeping up on product trends is how it stays ahead. "In order to maintain our competitive niche, we are especially watching the technologies in smart video analysis, system integration for access control or POS, and video image compression and processing," said George Tai, CEO.

IP plays a major role in Zenitel's technological innovation. Its best-selling product s include the Stentofon AlphaCom E, an IP-based intercom and security audio platformone of the company's top contributors to revenue. "IP has introduced a multi-service security infrastructure," said Thomas Haegh, Vice President for Products.

"More and more products," he continued, "will be networked using open standards that allow for easier integration. The market wants to have best-of-breed solutions where, for instance, it is possible to choose back-end communication servers from one vendor and end stations from another. This means that it is even more important for vendors to support open standards." Zenitel believes that the VoIP and the IT industry will drive open standards in the security communication market.

Zenitel noted that existing legacy equipment is a factor when designing new solutions. Despite the technological advances of IP, said Haegh, Zenitel has a huge installed base that has been built up over 60 years, so the company is committed to supporting both IP and traditional systems to provide the best possible solution to the customer. "Zenitel has also developed backward compatibility to enable our customers to communicate using a mixture of technologies and equipment."

Other companies agreed that developing integrated systems is an important part of technological development. British-based Texecom, which specializes in intrusion detection, offers integrated systems, said Clym Brown, Marketing Director. While it has numerous advantages, it requires complete buy-in from installers. Israeli Visonic, which also makes intrusion detection products, is focused on making real-time alerts of intruders a reality through its integrated PowerMaxPro solution. Integrated solutions will be part of the goal of research and development in the future.

DVTel sees continuing innovation as a must. "The electronic security market is undergoing constant change with the entry of new competitors from the IT space, many of them big brand names," said Gorovici. "We have to innovate constantly to maintain our leadership position. To this end, approximately 50 percent of our company employees are working on developing new products and new product functionalities to support and grow our technological leadership."

Strategic partnerships also enable pooling research resources. Milestone's solution for a multiradio broadband solution that effectively carried data, such as video surveillance images, was tested by Motorola. "Wireless mesh space," said Thinggaard, "is a key area for future implementations in widespread public areas that allow first responders to have access to critical video information. Motomesh Ready solutions offer wireless access to mission-critical data anytime, anywhere to first responders like police, ambulance, fire, or military personnel," he continued. The mobile mesh network carries wireless broadband data, including real-time, high-resolution, full-screen video that can be transmitted from surveillance cameras located throughout a city, managed by Milestone XProtect IP video management software.

Finding partners and maintaining mutually beneficial relationships is part of Bioscrypt's strategy. "One of the biggest challenges that a market leader faces is maintaining that market leadership," said Matthew Bogart, Vice President of Marketing. "Bioscrypt has become the market leader in biometric access control by working closely with its many hundreds of channel partners. We intend to continue enhancing this channel partnership and creating value for both Bioscrypt and our partners to ensure that we maintain our leadership position."

Alongside this, Bioscrypt will produce high-quality, reliable, robust products for enterprise access control for both logical and physical access. "These products will address future market requirements," said Bogart, "but will also incorporate the established, branded Bioscrypt quality of performance, as biometrics ultimately needs to work reliably, quickly and with assurance to verify an individual's right to a transaction."

Bioscrypt is also continuing to differentiate between positive authentication for such transactions as access to facilities or computers, and other applications such as negative watch-list scenarios. Bioscrypt believes that such differentiation is key to fully unlocking the potential of commercial applications of biometric technologies.

Investing in research and development is so significant that companies feel it is crucial in reversing fortunes. L-1 Identity Solutions, a biometric provider formed by strategic acquisitions, said in its financial statement, "We have a history of operating losses. Our business operations began in 1993 and, except for 1996 and 2000, have resulted in net losses each year, including a net loss of US$31 million in 2006. We will continue to invest in development of secure credential and biometric technologies, as well as related security consulting services."

DISTRIBUTION AND REVENUE

There are things over which security manufacturers have no control, such as limited or no demand for a company's products and services. American biometric provider Cogent saw revenue drop 36 percent in 2006, due partly to its limited customer base. "We have derived, and believe that we will continue to derive, a significant portion of our revenues from a limited number of customers," said the company in its financial report. Revenues from sale of solutions to the National Electoral Council of Venezuela were 38 percent and 37 percent of total revenue during the years ended Dec. 31, 2005 and 2006, respectively. Moreover, revenues from sale of its solutions to the U.S. Department of Homeland Security were 31 percent and 11 percent of total revenue during the years ended Dec. 31, 2005 and 2006, respectively.

L-1 also noted limited demand for biometrics in its financial report. "Biometric technologies have not achieved widespread commercial acceptance and our strategy of expanding our biometric business could adversely affect our business operations and financial condition," the report read.

Whether the market for biometric technologies expands is dependent on factors such as public perceptions of the intrusiveness of these biometric products and services, and the manner in which firms are using the information collected. The events of Sept. 11, 2001 and subsequent regulatory and policy changes in the U.S. and abroad have heightened interest in biometric security solutions. L-1 expects, therefore, that competition in this field, which is already substantial, will intensify.

Cogent also recognizes that the market for biometric solutions is highly competitive. "Many of our competitors have significantly more financial and other resources than we do," the report noted.

GROWING PAINS

Expanding channels requires work. German IP video surveillance provider Mobotix has the pleasant challenge of rapid growth, which it hopes to sustain while continuing innovation. "Midterm goals are to keep up and, indeed, increase the phenomenal growth of the past few years through continued investment in global expansion, R&D and in our new headquarters currently under construction here in Germany," said founder and CEO Dr. Ralf Hinkel. Long-term goals are to continue to establish the MxControlCenter video management software as a market-leading video management solution, increase product and solution portfolios and bring the Mobotix concept to new markets. Milestone enjoyed growth over the past year as well, said Thinggaard. He expects Milestone's staff of 100 to grow by 40 percent to 60 percent each year. "We have challenges to scale our business fast and focus on implementation and support skills for managing increased complexity of larger installations and integrated solutions."

The company is not alone. L-1 continued adding acquisitions in the past year, enjoying a 79 percent increase in revenue. "We are not aware of any other company that competes with us directly on the basis of an integrated and multimodal identity solution, covering the entire identity lifecycle from proofing to issuance," read the company's financial report.

As a complement to its R&D efforts, the strategy includes continuing evaluation of potential acquisitions of technologies and companies participating in the biometric industry. In 2006, such acquisitions included SecuriMetrics (February), Iridian Technologies (August) and SpecTal (October) with ComnetiX in February 2007. L-1's acquired companies maintain individual branded products and services, though whether this will continue is unclear.

CHALLENGES IN THE FUTURE

While the road to success is far from a cakewalk, being able to adapt to changing needs and technologies makes a difference. That the top 50 manufacturers in security, along with other significant players, have had lasting influence on the industry is due to their willingness to try new things.

"A major challenge is to keep an open mind," said Anders Laurin, Executive Vice President for Axis Communications. "There are always new players, new standards and new technologies. One must be able to adapt quickly to technical advancements and different ways to conduct business. The security industry has been facing some similar problems (decreasing margins) that have plagued other industries for the last three to four years, and Axis will continue to be extremely flexible to ride the next wave."

It is no easy task to think outside the box, but doing so allows security players to succeed in ever-changing environment. Despite communication barriers, difficulties in technical research and lack of education in the market, a number of companies have beaten the odds. Their success in overcoming challenges gives us all hope that the security industry will continue to be lively.